Do I Need an LLC or a Business License?

By Michelle Kaminsky, J.D.

Do I Need an LLC or a Business License?

By Michelle Kaminsky, J.D.

Starting a business requires a lot of planning, from choosing a legal structure to obtaining any necessary licenses and permits. If you choose to form a limited liability company (LLC), a business license is not required to start one. Whether you need a business license is determined by federal, state, or local law.

Woman in black apron holds out a credit card reader to a customer

LLC Basics

No state requires that you form an LLC to conduct business, but you may choose to do so for various reasons, ranging from potential tax benefits to liability protection for LLC owners.

LLCs are regulated by state law. To form one, the general process is to file certain fees and forms, including articles of organization and sometimes an operating agreement, which details how members will manage your company. You also need to name a registered agent within the state who is willing to receive service of process and other important documents for your LLC.

State law also governs the process for choosing an LLC name. For example, you may or may not need to include “Limited Liability Company" or “LLC" in your company's name. You should also check with the state's registry to make sure your chosen name isn't already taken. Checking for available domain names is also advisable and, if you will pursue trademark protection, you will also need to search the U.S. Patent and Trademark Office's database.

Although specifics vary, LLC members usually must be 18 or older, but they do not have to be state residents, so you do not have to live in a state to register an LLC there. Also, most states require LLCs to be registered with the state tax agency, particularly if the business sells taxable goods or hires employees.

Business License Basics

Obtaining a business license is a separate process from forming an LLC. Whether you need a business license—and how many and what types your business may require—depends on your location and the nature of your business.

Some businesses, for example, are required to hold several government-issued licenses and permits, including those businesses dealing with tobacco, firearms, alcohol, food, beauty, and retail.

Federal Business Licenses

Several categories of businesses require a federal license, especially if interstate commerce is involved. Businesses that deal with agricultural products, alcohol for consumption, aviation, firearms and weaponry, fish and wildlife, maritime transportation, mining or drilling, nuclear energy, broadcast communications, and transportation are regulated by various federal government agencies.

The paperwork required for registering with a federal agency is often lengthy and complex and may even require dealing with more than one agency to obtain all of the proper registration and permits.

State Business Licenses

Business operators in many categories, such as real estate agents, private investigators, auto mechanics, and building contractors, must obtain licensing from the state. Liquor stores, childcare centers, and beauty salons are also commonly required to hold state business licenses.

Moreover, physicians, attorneys, and certain other professionals must demonstrate a certified level of training, education, or both to obtain licensing in their jurisdictions.

If your business conducts retail sales, you must obtain a permit from the state to collect sales tax from your customers. State business licenses often need to be renewed periodically.

Local Licenses and Permits

Businesses that do not require federal regulation or state licensing frequently still require local permits to operate legally, depending on county, city, or other local regulations.

For example, if your business generates foot or automobile traffic, or if you store large amounts of inventory, you will likely need a permit.

DBA

No matter your type of business—and even if you operate an entirely online operation—you may need a "doing business as," or DBA, registration. A DBA, also known as a fictitious business name (FBN), is the business name presented to the public, and many states require a DBA if you're not using your own surname or if your business name implies more than one owner.

Filing a DBA generally requires paperwork, a fee, and sometimes publishing notice in the local newspaper, as well as periodic renewals.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.